Commercial Real Estate Blog

Suppose that a medium sized accounting firm is looking to expand its footprint by leasing office space in a new city.  After touring several spaces, they have narrowed it down to two options.  The options have similar rental rates, but the firm wants to conserve capital so they need to figure out which one is less expensive. To solve this problem, they need to identify and analyze all of the …

[Read more...] about Introduction to Comparative Lease Analysis

A typical retail shopping center or mall works under a tried and true business plan.  The owner and/or developer of the property works first to attract one or more “anchor” tenants and then surrounds them with a variety of smaller tenants who benefit from the traffic they create. Together, the anchor and their supporting tenants form a mutually beneficial “ecosystem” that works to deliver a …

[Read more...] about Understanding the Co-Tenancy Clause

The development spread is a back of the envelope calculation widely used by real estate developers. It is a fast and easy way to size up the financial feasibility of a real estate development project, prior to completing a more in depth analysis. In this article we’ll take a closer look at the development spread and walk through an example of how it is used in practice. What is the Development …

[Read more...] about How the Development Spread Works

The retail banking system operates on a fundamental promise between the bank and the customer.  The customer opens an account and deposits money in it with the expectation that the bank will continue to stay in business and that the funds will be available for withdrawal when needed. But, history tells us that this isn’t always the case. Throughout history, there is a long list of notable bank …

[Read more...] about Understanding the Texas Ratio

In some ways, a commercial real estate construction project is just like any other project. There is a start date, several interim milestones, and an end date when the property is complete and a certificate of occupancy has been issued. However, a commercial real estate construction loan is not like other loans. It is distinguished by the fact that the loan balance starts at $0 and rises over time …

[Read more...] about Understanding the Construction Draw Schedule

There is a wide spectrum of lease types in commercial real estate. To make it easier to communicate with others, it is not uncommon for complicated leases to be described using simple language. The ‘double net lease’ in commercial real estate is a term that describes a certain type of lease agreement, but it’s not always as simple as it might sound. In this article we’ll take a closer look at the …

[Read more...] about How The Double Net Lease Works

There’s no doubt about it, construction lending is tough.  From changing interest rates, long lead times, and freak weather events, there are a myriad of risks that can derail a project.  However, from a lender’s perspective, there’s one risk that is top of mind when making a construction loan - the borrower’s ability to make their loan payments during the construction term. To protect …

[Read more...] about How to Calculate an Interest Reserve for a Construction Loan